FYI: The automotive industry constantly navigates challenges with innovative solutions. Today, we dig into China’s bid to localize EV production, a national Vehicle-to-Grid pilot, and dealerships’ struggle to adapt to EV-induced service revenue shifts.
Workarounds in the Automotive Industry: Navigating the Future
The automotive sector is adept at finding innovative solutions to various hurdles, from struggling to pass emissions tests to navigating parts shortages and tariffs. As the world shifts towards electric vehicles (EVs), manufacturers continually seek ways to adapt and thrive.
Welcome to Critical Materials, your daily dive into automotive technology and EV news. Today, we’re exploring China’s strategic push to retain EV production at home while manufacturers evade tariffs, China’s ambitious Vehicle-to-Grid (V2G) project to stabilize their power grid, and the daunting challenge dealerships face as they adjust to lost service revenue in the EV era. Let’s delve deeper.
China’s Strategy to Retain EV Tech In-House
China has become a focal point in the EV market, accounting for a significant portion of global sales. However, international tariffs on Chinese-made EVs are prompting manufacturers to consider establishing production plants abroad. In response, China’s Ministry of Commerce (MOFCOM) has urged Original Equipment Manufacturers (OEMs) to export knock-down kits instead of fully building vehicles overseas.
This strategy involves shipping partially assembled kits that can be completed in foreign factories, preserving vital trade secrets and mitigating regulatory risks. Automakers like Chery and SAIC are already adopting this method, as seen with Chery’s plan for the former Nissan plant in Barcelona and SAIC’s facility in Pakistan.
China’s directive comes amid global accusations of receiving excessive subsidies that artificially inflate demand for Chinese EVs. Tariffs as high as 100% have been imposed to counteract this issue. MOFCOM’s recommendation aims to counteract these tariffs without losing control over key production elements.
National V2G Pilot: A Leap Towards Power Grid Stability
China’s power grid has been grappling with instability due to fluctuating demand and supply. In a bid to stabilize the grid, China is turning to its burgeoning fleet of EVs. With over 60% of global EV sales and around 25 million battery-powered vehicles, the country plans to launch a national Vehicle-to-Grid (V2G) pilot program.
This initiative will involve nominating one city in each province to establish a V2G system, enabling EVs to feed power back into the grid during peak demand periods. The goal is to expand these projects and explore scalable commercial models. By concentrating 60% of EV charging during off-peak times and 80% of private charging outside peak hours, China hopes to alleviate grid strain using EV batteries as supplemental energy sources.
EVs do increase power demand, but they can also serve as power suppliers, buffering the grid against high usage times. This concept, despite potential battery degradation concerns, offers a novel approach to grid stability and energy management.
Dealership Dilemma: Adapting to EV Service Revenue Shifts
As EVs enter the market with fewer moving parts and reduced maintenance needs, dealerships face significant challenges in maintaining service revenue—their primary income stream. With routine services like oil changes and gasket replacements dwindling, dealerships must rethink their strategies.
Jim Roche, CEO of WarrCloud, emphasizes a shift towards increased warranty work rather than customer-paid services. According to a CDK Global whitepaper, future service concerns will likely focus on software and infotainment issues, with consumables like tires and wipers remaining constant revenue sources.
Interestingly, tires are becoming the "new oil change" for EVs. As traditional service opportunities decrease, dealerships must adapt by enhancing their warranty processing efficiency and exploring new business models.
The Road Ahead
The automotive industry’s ability to innovate and adapt is unparalleled. From China’s strategic moves to localize EV production and stabilize the power grid, to dealerships navigating new revenue models, these developments represent the industry’s dynamic nature.
For more insights and updates, reach out to us at tips@automotive.fyi, or follow us on Twitter @automotivefyi.
William Kouch, Editor at Automotive.fyi
